Earnings Call Transcript - MSA Q3 2025

Larry De Maria, Executive Director of Investor Relations

Thank you. Good morning, and welcome to MSA Safety's Third Quarter 2025 Earnings Conference Call. This is Larry De Maria, Executive Director of Investor Relations. I'm joined by Steve Blanco, President and CEO; Julie Beck, Senior Vice President and CFO; and Stephanie Sciullo, President of our Americas segment. During today's call, we'll discuss MSA's third quarter financial results and provide an update on our full year 2025 outlook. Before we begin, I'd like to remind everyone that the matters discussed during this call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, all projections and anticipated levels of future performance. Forward-looking statements involve a number of risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed today. These risks, uncertainties and other factors are detailed in our SEC filings. MSA Safety undertakes no duty to publicly update any forward-looking statements made on this call, except as required by law. We've included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation. The presentation and press release are available on our Investor Relations website at investors.msasafety.com. Moving on to today's agenda. Steve will first provide an update on the business. Julie will then review our third quarter financial performance and 2025 outlook. Steve will then provide closing remarks and open the call for your questions. With that, I'll turn the call over to Steve Blanco. Steve?

Steve Blanco, President and CEO

Thanks, Larry, and good morning, everyone. Thank you for your continued interest in MSA Safety. Before we start, first, I'd like to welcome Julie Beck to MSA. Julie brings extensive experience across all aspects of finance from her previous public and private company experiences. Her leadership and financial acumen will be a tremendous asset to our team, and I'm excited to partner with her in the next chapter of serving our mission of safety for our customers. I also want to extend my heartfelt thanks to Elyse Brody for her outstanding leadership and dedication while serving as interim CFO. Elyse stepped into the role with grace and professionalism and her contributions during this transition have been invaluable. So on behalf of the Board and the executive team, we're deeply grateful for her continued commitment and support. Please join me in welcoming Julie and thanking Elyse for her exceptional work. Now let's move on to our review of the third quarter. I'm on Slide 4. In the third quarter, consolidated reported sales growth was 8% with 3% organic and adjusted earnings per share were $1.94. Our team continued to perform well, delivering a solid quarter despite encountering stronger-than-expected near-term headwinds in the fire service. This was based on sustained strength in detection, along with healthy expansion of industrial PPE driven by fall protection. A decline in the fire service partially offset growth. The M&C TechGroup acquisition contributed $15 million for the quarter. We're pleased with M&C's performance thus far and its integration into the MSA business. Looking at sales by product categories, Detection's 6% organic growth was driven by strength in both fixed and portable instruments. More than half of absolute growth in portables came from connected devices. Organic sales in fire service declined 3% year-over-year. In the U.S., the market dynamics surrounding AFG funding and NFPA standard change had a moderate impact on the quarter, while international markets were mixed. Organic sales of industrial PPE increased 7% with growth across all main categories. Fall protection continued its recent strength with double-digit organic growth. Moving to orders. Order pace across our product categories was encouraging, albeit mixed. Detection orders were up double digits and industrial PPE orders increased mid-single digits. A double-digit decline in fire service orders was principally due to the near-term market dynamics in the Americas as well as the U.S. Air Force comp. I'll address these in more detail in a few minutes. Sequentially, the backlog declined in the third quarter due entirely to timing in the fire service. Overall, backlog remains within normalized levels. Moving forward, we expect to see a near-term negative impact from the fire service order pace in the Americas following the U.S. government shutdown. Our overall book-to-bill was slightly below 1. Turning to Slide 5. I want to provide some notable progress we've made across the pillars of the ACCELERATE Strategy in the third quarter before providing an update on the current dynamics surrounding the fire service. First, we continue to strengthen our leadership in industrial safety technology through customer-driven new product development and continued momentum in these key growth accelerators. I'm pleased to note that we recently introduced the ALTAIR io 6 multi-gas connected portable device and the new H2 V-Gard safety helmet at this year's National Safety Congress. The io 6 is the latest example and addition to the MSA+ platform and is designed for confined space monitoring and sampling solutions. While we do not expect it to provide a significant near-term lift in revenue, we see it as a valuable product that will contribute to the long-term build-out of our connected ecosystem in portable gas detection. The H2 helmet is a Full Brim type 2 helmet that joins our extensive market-leading lineup of industrial safety helmets. And from a growth perspective, we continue to experience the benefits of our investments in our needed now inventory within fall protection, leading to excellent performance in this strategic growth accelerator for the second straight quarter. Centered on customer experience, the organization has been able to decrease lead times and secure new business with better availability. Year-to-date, sales in fall protection are up double digits organically. Second, on the operational and commercial side, we continue to execute our tariff mitigation programs in the third quarter. As a reminder, we are targeting price/cost neutrality in the first half of 2026. We also had another strong quarter for MSA+. I'm pleased to note that not only did we win a sizable competitive tender, but another large customer served as a reference, further emphasizing our solutions benefits and why we remain optimistic about this new customer adoption. Finally, our M&A pipeline remains active, and our strong balance sheet positions us well for growth-oriented deployment and cash returns to shareholders as part of our disciplined capital allocation strategy. Turning to Slide 6. I'd like to take a moment to provide some insights into the current conditions affecting the fire service market in the Americas, including the timing of AFG funding here in the U.S., our largest market for this product category. As we approach year-end, there are 2 dynamics for consideration in this market: the NFPA certification process, which usually occurs every 5 or so years and the annual release of federal assistance to firefighter grants, or AFG, which is typically released in the summer months through September. As we've mentioned, NFPA standard years often see increased short-term volatility as customers decide when to renew their fleets. Nothing has changed here, and we still expect to see approval sometime by early 2026, if not sooner. What is different this year is the timing of the funds release from the AFG program. This program, as always, has been fully funded, but award notifications were issued historically late this year coming at the very end of September. Then the U.S. government shutdown has slowed funding for the awarded departments, creating additional layers of complexity. This had a moderate effect on our revenue in the third quarter. The larger impact is on order timing in the fire service. The delays in receiving the orders will shift some revenue into 2026. Again, our pipeline remains strong. It's a matter of timing. We successfully navigated the approval processes before and seen similar market conditions, and we're fully prepared to serve our customers in the fire service and to deliver the products and solutions they need to keep themselves and our communities safe. With that, it's now my pleasure to turn the call over to Julie to discuss our financial performance in the third quarter. Julie?

Julie Beck, Senior Vice President and CFO

Thank you, Steve, and good morning, everyone. We appreciate you joining the call. Thank you for those kind words, Steve, and thank you to the entire MSA team for doing such a great job in my orientation to MSA. This is a wonderful opportunity to work with a company that offers innovative products and solutions, great people with a continuous improvement mindset and a strong balance sheet, providing the optionality to create shareholder value. I am truly grateful for the chance to join MSA and support the mission of safety, which has been a central theme in my career. Anyone who knows me understands I am passionate about what I do, and MSA is a perfect fit for me with a fantastic culture. I see tremendous opportunity to work with the team here, continue MSA's journey and make a meaningful contribution. I have been so impressed with the commitment that everyone here displays for the work they do and the mission we serve. I look forward to meeting all of you over time. With that, let's start on Slide 7 with the quarterly financial highlights. Third quarter sales were $468 million, an increase of 8% on a reported basis or 3% organic over the prior year. M&C added 4% to overall growth and currency translation was a 1% tailwind based on the strengthening euro. As expected, GAAP gross margins continue to face pressure this quarter, declining to 46.5%, down 140 basis points from last year. Gross margins reflect inflation, tariff and transactional FX increases, partly offset by price increases and productivity gains. We are beginning to see the tariff impact become more noticeable in the second half, aligning with our mitigating pricing strategies, and our aim remains to balance this by the first half of 2026. GAAP operating margin was 20.1%, with an adjusted operating margin of 22.1%, which was down 50 basis points from a year ago due to the contraction in gross margins, partially offset by effective SG&A management and variable compensation adjustments. However, our adjusted operating margins increased 70 basis points from the second quarter. We are diligently focused on SG&A productivity, pricing and tariff mitigation plans to counter headwinds. Quarterly GAAP net income totaled $70 million or $1.77 per diluted share. On an adjusted basis, diluted earnings per share were $1.94, up 6% from last year. Now I'd like to review our segment performance. In our Americas segment, sales increased 5% year-over-year on a reported basis or 3% organic as high single-digit organic growth in Detection and low single-digit growth in Industrial PPE was partially offset by a low single-digit contraction in fire service. Currency translation was less than 1% tailwind in the quarter. Adjusted operating margin was 28.3%, down 240 basis points year-over-year. Margin contraction was mainly due to inflation, tariffs and FX, partially offset by price and effective SG&A management and variable compensation adjustments. In our International segment, sales increased by 16% year-over-year on a reported basis with a 7% contribution from M&C, a 5% increase on an organic basis and a tailwind from FX. Double-digit organic growth in Industrial PPE and mid-single-digit growth in Detection was partially offset by a low single-digit contraction in fire service. Adjusted operating margin was 16%, 240 basis points above last year, driven by higher volume, effective SG&A management and the impact of M&C. Now turning to Slide 8. We delivered robust free cash flow of $100 million or 144% of earnings. Quarterly operating cash flow was up 33% from a year ago. As expected, CapEx returned to our normal range following the increase in the second quarter. Year-to-date, free cash flow was $189 million, up $41 million from last year, representing 99% conversion. As for capital allocation actions taken in the quarter, we returned $21 million to shareholders through dividends and invested $12 million in CapEx. Our year-to-date share buybacks offset dilution for the full year. We have $130 million remaining on the current authorization, and we expect to repurchase shares in the fourth quarter following the strong free cash flow generation we have delivered so far this year. We also repaid $50 million of debt in the quarter as net debt was $459 million compared to $532 million in the second quarter. We ended the quarter with net leverage of 1x, and our weighted average interest rate was 4.1%. As Steve mentioned earlier, our balance sheet and ample liquidity of $1.1 billion continue to position us well to invest in our business, and we maintain an active M&A pipeline. Let's turn to our 2025 outlook on Slide 9. We maintain our low single-digit full year organic growth outlook. Overall, our business remains healthy. Certainly, the fourth quarter is impacted by timing in the fire service and the U.S. government shutdown, but the fundamentals there are healthy as we work through current events. The timing of AFG funds being released and approval of the next NFPA standard remain key variables for the balance of the year that are beyond our control. We believe that the AFG timing delay and the ongoing U.S. government shutdown will impact a portion of our fourth quarter sales. However, we expect continued momentum in fall protection and detection as key performance tailwinds. Given some of the moving pieces out there, I'd like to help your modeling a little bit. We have delivered 4% reported growth, including 2% organic growth year-to-date through September and remain on track to be within our low single-digit organic outlook. However, the later-than-normal AFG grant awards and subsequent U.S. government shutdown will impact us in the fourth quarter. While this is dynamic, we now anticipate that the shutdown will take roughly 1% of growth off the full year organic pace we were on, mostly in fire service. In the event of a prolonged government shutdown, we could see additional sales shift from the fourth quarter to 2026. Again, this is simply a timing issue, and we remain confident in our fire service business. In addition to our low single-digit organic growth outlook, we continue to expect M&C to add approximately 2 points to full year revenue growth and FX to be about 1% positive. Our below-the-line items are unchanged from our previous outlook. In conclusion, we remain confident in our business and our ability to navigate macro uncertainty and timing challenges. Our resiliency is truly a strength. With that, I'll now turn the call back to Steve.

Steve Blanco, President and CEO

Thank you, Julie. I'm on Slide 10. To close, I'm proud of our team's execution and thank all of our associates for their continued commitment to serving our mission of safety in the third quarter. I remain encouraged that we will continue to deliver strong shareholder value as we execute our Accelerate strategy to drive long-term profitable growth. With that, I'll turn the call back to the operator for Q&A.

Operator, Operator

Our first question is from Rob Mason with Baird.

Robert Mason, Analyst

Hi Julie, thanks for the additional color around thinking about the fourth quarter. I was trying to do some quick math here. But if I think I interpreted your comments correctly, it sounds like we probably won't see much of the normal seasonal uplift in the fourth quarter. I assume that's all just due to the fire service. Is my math correct?

Julie Beck, Senior Vice President and CFO

Correct. That's correct. That's correct. We're relatively consistent between Q3 and Q4, maybe a slight uptick.

Robert Mason, Analyst

Yes. Steve, how should we think about the awards that have been tracked at the very end of September? The funding appears to take longer to come in. Does that stop your customers from placing orders? Do they wait until they have the funding available? I'm just curious to understand the timing a bit more.

Steven Blanco, President and CEO

Yes, typically when FEMA releases these funds, they have up to a year to spend the money. However, many fire departments tend to act quickly once they receive the awards. They do go through a process, and we can discuss that further, but they eventually take action. With the government shutdown, there's an additional step where they need to formally accept the award from the government, which slows things down. Historically, we’ve received funding sooner than this, as it was just at the very end of September, right before the shutdown. Normally, you would see a buildup in orders towards the end of Q3 and into early Q4, but that has been delayed a bit.

Robert Mason, Analyst

Yes. Okay. And maybe just last question, I'll get back in the queue. Julie, again, nice work and team on the operating expense controls in the quarter. There was the mention around maybe some variable comp adjustments. The thought was maybe we're tracking to $108 million per quarter type SG&A number. It was below that, obviously, in the third. But is that more of a normalized rate? Or have you made some adjustments to that?

Julie Beck, Senior Vice President and CFO

Yes. We would expect that our fourth quarter SG&A would return to more normal levels.

Ross Sparenblek, Analyst

Maybe just touching on margins here. FX has recently flipped to a tailwind as you guys called out. Can you maybe just remind us of the cross currents with that transactional risk and then also maybe some of the other moving parts?

Julie Beck, Senior Vice President and CFO

Yes. So we had some transactional FX that was negative in the quarter. But really, we've seen some overall inflation in the supply chain as well as we saw a much higher tariff impact in Q3 as the tariffs are hitting the income statement now in Q3. I would say that our costs are up primarily in inflation and tariffs and just a slight bit more in transactional FX.

Jae Hyun Ko, Analyst

This is James on for Saree. Kind of going back to fire service here. You noted that pipeline remains strong here. So I believe there are a lot of pent-up demand here. It's just like near-term uncertainties kind of impacting kind of conversion here. So how should we think about like fire service kind of going into 2026 once all this kind of near-term headwind kind of clears out?

Steven Blanco, President and CEO

Thank you for the question. Looking at the short-term, we usually have a strong year-end due to the firefighter grant releases we discussed. This often leads to fire departments placing orders, and we want to ensure they receive the equipment they need to perform their duties. However, some timing issues have slightly delayed this process. Moving into 2026, excluding the timing of firefighter grant awards, we anticipate demand to remain consistent with this year's expectations. There are positive developments in certain global regions, although we've experienced some international pressure from delays in Asia, particularly Mainland China, which we expect to improve around 2026. In North America, our largest market, we foresee a steady year-over-year performance. Looking further ahead, we are optimistic about the fire service sector, especially in 2027, 2028, and 2029, which we believe will present significant business opportunities. Next year appears solid, and beyond that, we expect a positive trajectory. Yes. Our expectation is that this is a government agency, and we do not control when they decide to make a decision. However, we have received a lot of feedback from the market and others indicating that they expect the approval to come through early next year at the latest, with a possibility that it might happen this year. We believe they are organizing the necessary steps. As we have mentioned before, we have completed all required processes and are confident that our product is ready. While we are uncertain about the competitive landscape, we have a relatively high confidence that the approval will be issued no later than early 2026. Although we do not have control over the timing, that is our expectation.

Linda Umwali, Analyst

This is Linda Umwali speaking on behalf of Mike Shlisky. I'll begin with this question. Should we be worried about a potential federal government shutdown? I know Julie mentioned that might impact your military business and other federal departments. Will any demand lost during the shutdown be regained after it concludes? If you could provide some quantification on that, it would be appreciated.

Steven Blanco, President and CEO

We are seeing some additional impact outside of the fire service, although it is less significant. There are some delays from a detection perspective, but I wouldn't say we are overly concerned as we anticipate this will be resolved in the coming weeks. We are managing the situation, and we expect things to improve afterward. The impact is smaller in scale and while it does affect the business in the U.S. to some extent, it is not a major concern beyond the fire service. Overall, I think we are in a good position regarding demand, particularly in relation to defense and government spending.

Julie Beck, Senior Vice President and CFO

We are forecasting sales growth in the fourth quarter, along with a slight margin improvement in the same period. Additionally, sales are expected to increase for the entire fiscal year.

Linda Umwali, Analyst

And then I was wondering if you guys could update us on the MSA+ subscriptions. Has that ramped up through 2025?

Steven Blanco, President and CEO

Another strong quarter for MSA+. It continues to be performing very well in the market. We had a few signature wins, which we didn't ship a couple of them in the third quarter, but they came in. Very pleased with that. As we noted, I noted in the prepared remarks, over half of the growth in portable instruments are from MSA+. So it's performing right where we hoped it would. It continues to do really well. I think what's really for us, exciting and really cool is the fact that we have this full portfolio, we have this diversity of capability for the customer. It actually has allowed us and enabled the customer to choose these different options, which then has allowed us to grow share in detection, in the portable gas detection space, not just with the MSA+ connected solution, but with our continued best-in-market traditional solution. So I think that total suite of solutions, the customer gets to see it all from us, and we want them to pick the best solution for their needs, and it's really played out well in both cases.

Linda Umwali, Analyst

I wanted to revisit the fire service business. The organic growth in the Americas was negative, and the international fire segment also experienced negative growth, although the international business did not face the same NFPA and shutdown issues. Can you elaborate on what’s going on there? Is it possible that the negative trend could continue into the fourth quarter after last year’s double-digit gain?

Steven Blanco, President and CEO

When considering the international fire service, there are a couple of dynamics at play. In Asia Pacific, we have experienced some delays in order timing, particularly in Mainland China, where activities have been postponed. We anticipate that these orders will likely materialize later this quarter and into 2026, leading to an improved order pace. In Europe, there has been a shift in funding from fire services to defense in some countries, particularly impacting larger tenders. This might result in approximately 10 to 15 percent fewer units. The interesting aspect is that this shift is driven by a decision to increase investment in defense. For us, this translates to a strong performance in the protective ballistic helmet segment within the industrial business in Europe, where we are witnessing positive results. Although there is some softness in the international fire service, our team is addressing these challenges. When looking at the combined effects of these factors, this is what we observed in the international segment in Q3. In Q4, we expect to see a slight increase in international orders as we begin to receive some of the discussed orders, with optimism continuing into 2026.

Julie Beck, Senior Vice President and CFO

No, thanks for your question. No, we don't have any major restructurings to include in the model.

Richard Magnusen, Analyst

This is Richard Magnusen in for Jeff Van Sinderen. My question goes back regarding the ALTAIR, the detection io 6 that you introduced recently. So the io 6 and io 4 detectors, they address different needs. Are there any other detector applications situations that you're working on where you can give us more detail where you see this MSA+ family going? And maybe can you elaborate on expanding software applications and even how to accelerate subscription revenue growth?

Steven Blanco, President and CEO

So thanks for the question. So if I think of io 6, certainly, it will provide nice long-term coverage. It's really a great solution for confined space and the sampling, applications our customers have. Your comment about innovation, absolutely, we continue to innovate in this space. And I think the team is doing a nice job really looking at how we continue to expand capabilities. Nothing to speak of today that we would share publicly on what the next one or when that might be. But the connected solutions we have in portables, we feel really good about, and we think the io 6 will build upon that. When you think of it outside of that space, we have other solutions that allow us to have this expansion in the recurring revenue model. And I think the team is doing a nice job really trying to match the customer with where they're at and their buying behaviors. So that's a focus the team has. And as we talked with our ACCELERATE Strategy, it's a focus that we continue to lean in on. And I think what I like and what we've talked about is we mentioned this during the Investor Day when we launched the ACCELERATE Strategy, but we said, hey, the key categories here where we know we can compete and win very effectively and have the right to really compete is detection, fall protection and certainly, we're going to get through the hump on fire service. That's the communication we had. And you look at the performance the team has delivered, and it's matched that up exactly, right? We've continued to grow the detection business. We're doing that through share growth and addressing some growth in TAM and then fall protection has been a nice tailwind as well, and we expect that both of those to continue.

Brian Brophy, Analyst

Curious the latest you're seeing on some of your short-cycle businesses, hard hats, anything else to comment on? Curious what you're seeing from that perspective.

Steven Blanco, President and CEO

Yes. Thanks for the question, Brian. PPE was strong for the quarter, specifically because of the fall protection I just mentioned, but we're also seeing some growth in the protective ballistic helmets we talked about. The markets are still mixed. Head protection in some areas, pretty solid. Other areas, it's just kind of choppy. It's really been a similar story throughout the year, Brian. We haven't seen that change a heck of a lot yet. It's not down significantly. It's not up significantly. It's just from quarter-to-quarter, we're just seeing it kind of continue on as the employment has been fairly stable overall. And it's market specific. So if you think of the markets we participate in, some markets such as manufacturing, nonresidential construction, a little softer and have been. Energy is okay. It depends on which piece of energy. If you look at downstream, midstream, pretty solid, and we compete pretty well. And then the upstream side, softer, and we don't expect that to change too much. I think the nice thing as we look forward, there's some sentiment that seems to be improving in this regard, and the channel seems to be sharing that as well. So we'll see how that plays out. But it's a continuation of what we've seen really throughout 2025. Yes. So the M&C business, we're really pleased with. They've done a nice job. I think the whole team, it's been a great fit and really pleased with how our team and their team have embraced each other to work together. They're laser-focused on integrating this and looking at opportunities for growth. And we had a nice cross-functional discussion with the team here in the U.S. in the third quarter, and they've identified some really nice growth areas. The third quarter was pretty nice here. U.S., we've unlocked some nice opportunities that the team thinks long term, we can do really well with. I think that's going to be a great business that we'll see continued tailwinds going into the long-term future. Europe, also strong, typically Germany. But as far as growth, I think the Americas is really going to shine there. Yes, we are very active. The pipeline is solid. We were pleased to act on M&C in May, and we intend to keep looking at deals, which we are evaluating to ensure they align with MSA and our strategy. We have a great pipeline to support this. Regarding leverage, we provided guidance as part of the ACCELERATE Strategy, which highlights our focus areas. This should give you an idea of what we can continue to do, and we plan to move forward. Timing is important, as the fit must align with the seller’s price expectations, which don’t always match. However, if they do, we want to proceed with those opportunities. The pipeline indicates that we can achieve this.

Ross Sparenblek, Analyst

Just back to the price dynamic, can you maybe give us a sense of where the year-to-date price sits across the 3 segments? I mean, has it been broad-based? Or is it more selective?

Steven Blanco, President and CEO

Yes. We'll hit this 2 ways. I'll talk about kind of strategically where we're at and then maybe Julie can give some color on the specifics in the pricing side. We really look at the price side. I think, Ross, we did one targeted price increase in the first half of the year in the U.S. and the Americas. We did another one in Asia in the summer and a little bit more broad-based in October based on the sustained visibility to the tariff regime and some of the inflationary environment that Julie talked about. So that's really where we're at. So some of those, you've got to get some flow-through certainly from those tariffs and what's in the inventory and how that processes through and the order book that we have. And then next year, we would expect to get back on the normal cycle where we'd have our January 1 price increase, and we'll manage that. The team also continues to work on efficiencies. I think the nice thing is you saw some of those come through. We did quarter-to-quarter. And sequentially, even with the heavier pressure we had on cost, the team managed that pretty well. And I think we've got a laser focus on how we do that going forward. But maybe, Julie, you can quantify that more.

Julie Beck, Senior Vice President and CFO

Yes. When considering our organic growth in the third quarter, it was mainly driven by price. We experienced a sequential improvement in margins from Q2 to Q3, and we anticipate a slight sequential increase in margins from Q3 to Q4 as well, largely due to pricing strategies. I hope that provides some clarity. It’s hard to determine if some of this will materialize in the fourth quarter, the first quarter, or the second quarter of next year as we move into 2026. However, we are confident in the strength of demand and the business moving forward. It remains uncertain, which is why we provided a range indicating the fourth quarter may be affected, but we anticipate a recovery in 2026.

Steven Blanco, President and CEO

Yes. Julie highlighted a point where we are seeing enough pressure that we consider it a challenge for the fourth quarter, extending into the first, second, and third quarters. However, it all depends on when the fire departments, particularly in light of the NFPA standards change, decide to make their purchases. We anticipate that specific point may occur sometime in 2026, but it's hard to pinpoint exact timing from one quarter to the next.

Ross Sparenblek, Analyst

I believe that instead of only focusing on the organic decline this year and excluding some of the large orders for comparisons, there may be additional pent-up demand in the pipeline that is difficult to see at the moment. Do you think that’s reasonable?

Steven Blanco, President and CEO

Yes. I think the Air Force comp was tough. I think I would look at the demand if I looked at it the way you could think about this is '26 demand-wise is probably going to be similar to a normal year '24, '25 demand, excluding AFG grant thing. That's how I kind of look at it. You get past '26, you probably are going to start to see a bit different quantified demand curve start to tick up, I would anticipate in the latter half of the decade. But '26 is going to be probably pretty solid and consistent with what we would expect in the '24, '25 demand outside of, as you noted, those extremely large orders. Fixed was double digit. Portable was single digit. And again, portable, great strength as we've talked just before the question before is really good growth in the connected space. The fixed business has been really solid. I think what we look at and what we try to come back to on the fixed business, it's another example of the diversity we have. We really like when we get some nice capital investment in some big projects. But even when you don't on that fixed business, you've got this continuation and that's what we're seeing. You see this day-to-day business continue on because we have such a strong, large installed base. So when a customer expands their site and they don't necessarily have a large project spend, we're still seeing the benefit of that. And the fixed is playing out that way. It's a great diverse business that continues to perform very well.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Larry De Maria for any closing remarks.

Larry De Maria, Executive Director of Investor Relations

Okay. Thank you. We appreciate you joining the call this morning and for your continued interest in MSA Safety. If you missed a portion of today's call, an audio replay will be made available later today on our Investor Relations website and will be available for the next 90 days. We look forward to updating you on our continued progress again next quarter.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.